RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit I.O.P. 32.1(b)

File Name: 13a0308p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT
_________________
X
CAROLE L. HUGHES; HARRY HUGHES,
Plaintiffs-Appellants, No. 12-3765
v.
>
,
JOHN B. MCCARTHY, Medicaid Director,
Defendant-Appellee. N
Appeal from the United States District Court
for the Northern District of Ohio at Akron.
No. 5:10-cv-01781Benita Y. Pearson, District Judge.

Argued: March 7, 2013

Decided and Filed: October 25, 2013
Before: KETHLEDGE, WHITE, and STRANCH, Circuit Judges.*
_________________
COUNSEL
ARGUED: William J. Browning, BROWNING, MEYER & BALL, CO. LPA,
Worthington, Ohio, for Appellants. Rebecca L. Thomas, OFFICE OF THE OHIO
ATTORNEY GENERAL, Columbus, Ohio, for Appellee. ON BRIEF: William J.
Browning, BROWNING, MEYER & BALL, CO. LPA, Worthington, Ohio, for
Appellants. Rebecca L. Thomas, OFFICE OF THE OHIO ATTORNEY GENERAL,
Columbus, Ohio, for Appellee. Ren H. Reixach, WOODS OVIATT GILMAN LLP,
Rochester, New York, Eugene P. Whetzel, OHIO STATE BAR ASSOCIATION,
Columbus, Ohio, Howard S. Scher, UNITED STATES DEPARTMENT OF HEALTH
AND HUMAN SERVICES, Washington, D.C., for Amici Curiae.

We amend the caption as reflected in this opinion.

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_________________
OPINION
_________________
HELENE N. WHITE, Circuit Judge. Plaintiffs Carole and Harry Hughes
(collectively, the Hugheses), a nursing home resident and her community spouse, appeal
the district courts grant of summary judgment in favor of the director of the Ohio
Department of Job and Family Services (ODJFS or the Ohio agency),1 holding that the
Ohio agency properly penalized Mrs. Hughes based on Mr. Hughess purchase of an
annuity for himself with funds from his IRA account. The district court held that
42 U.S.C. 1396r-5(f)(1)2 precluded the transfer of assets because it exceeded Mr.
Hughess community spouse resource allowance (CSRA). Because the transfer occurred
before the Ohio agency determined that Mrs. Hughes was eligible for Medicaid coverage
and 1396p(c)(2)(B)(i) permits an unlimited transfer of assets to another for the sole
benefit of the individuals spouse, we REVERSE.
I.
A.
Congress established the Medicaid program in 1965 to provide federal and state
funding of medical care for individuals who cannot afford to cover their own medical
costs. See Social Security Amendments of 1965, Title XIX, Grants to States for Medical
Assistance Programs, Pub. L. No. 8997, 79 Stat. 286, 34352 (codified as amended at

Since this cases inception, ODJFS has been reorganized. The duties and legal responsibilities
of the director of ODJFS have been transferred to the state Medicaid director. See Am. Sub. H.B. No. 59,
2013 Ohio Laws 25 (provisions to be codified). In this opinion, we refer to the state Medicaid agency as
the Ohio agency.
2

This provision reads:

An institutionalized spouse may, without regard to section 1396p(c)(1) . . . , transfer an

amount equal to the community spouse resource allowance . . . , but only to the extent
the resources of the institutionalized spouse are transferred to (or for the sole benefit of)
the community spouse. The transfer under the preceding sentence shall be made as soon
as practicable after the date of the initial determination of eligibility . . . .
42 U.S.C. 1396r-5(f)(1).

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42 U.S.C. 13961396w-5); Harris v. McRae, 448 U.S. 297, 301 (1980). The program
is administered by the Secretary of Health and Human Services (HHS or the federal
agency), who in turn exercises her authority through the Centers for Medicare and
Medicaid Services (CMS).3 To implement the program, [e]ach participating State
develops a plan containing reasonable standards . . . for determining eligibility for and
the extent of medical assistance within boundaries set by the Medicaid statute[s] and the
Secretary of [HHS]. Wis. Dept of Health & Family Servs. v. Blumer, 534 U.S. 473,
479 (2002) (internal quotation marks omitted); see 42 U.S.C. 1396a(17).
In 1988, Congress passed the Medicare Catastrophic Coverage Act (MCCA),
Pub. L. No. 100360, 102 Stat. 683, to protect community spouses from pauperization
while preventing financially secure couples from obtaining Medicaid assistance. To
achieve this aim, Congress installed a set of intricate and interlocking requirements with
which States must comply in allocating a couples income and resources. Blumer,
534 U.S. at 480 (internal citation and parenthetical omitted). In particular, the MCCA
allows the community spouse to keep a portion of the couples assetsthe
CSRAwithout affecting the institutionalized spouses Medicaid eligibility.4 See
42 U.S.C. 1396r-5(c)(2), (f)(2)(A). As the first step in determining the CSRA, the total
of all the couples resources is calculated as of the time the institutionalized spouses
institutionalization began; half of that total is allocated to each spouse (the spousal
share). Id. 1396r-5(c)(1)(A). Once the spousal share is determined, the CSRA is
calculated by measuring the spousal share allocated to the community spouse against a
statutory formula, which is further defined under each state plan, and subject to a ceiling
and floor indexed for inflation. Id. 1396r-5(c)(2)(B), (f)(2), (g).
The CSRA is considered unavailable to the institutionalized spouse in the
eligibility determination, but all resources above the CSRA (excluding a small sum set
3

Until 2001, CMS was known as the Health Care Financing Administration. See CMS; State of
Organization, Functions and Delegations of Authority; Reorganization Order, 66 Fed. Reg. 35437-03 (July
5, 2001).
4

As relevant here, the term institutionalized spouse means an individual who is in a nursing
facility and is married to a spouse who is not in a nursing facility. The term community spouse means
the spouse of an institutionalized spouse. 42 U.S.C. 1396r-5(h)(1)(2).

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aside as a personal allowance for the institutionalized spouse . . . ) must be spent before
eligibility can be achieved. Blumer, 534 U.S. at 48283 (citing 42 U.S.C. 1396r5(c)(2)). However, a community spouses income is not considered available to the
institutionalized spouse for eligibility purposes, except in limited circumstances.
See 42 U.S.C. 1396r-5(b). Moreover, after the month in which an institutionalized
spouse is determined to be eligible for benefits . . . , no resources of the community
spouse shall be deemed available to the institutionalized spouse. Id. 1396r-5(c)(4).
B.
A state plan must comply with the provisions of [] 1396p . . . with respect to
liens, adjustments and recoveries of medical assistance correctly paid,[] transfers of
assets, and treatment of certain trusts. 42 U.S.C. 1396a(18) (internal footnote
omitted). Paragraph (1) of 1396p(c) requires (in relevant part) that a state plan must
provide that if an institutionalized individual or the spouse of such an individual . . .
disposes of assets for less than fair market value on or after the look-back date (which,
as relevant here, is defined as thirty-six months prior to the first date on which the
institutionalized spouse applies for Medicaid assistance), the individual is ineligible for
medical assistance for services (such as coverage for nursing home costs) for the
numbers of months that the assets would have covered the average monthly cost of such
services. Id. 1396p(c)(1)(A); see id. 1396p(c)(1)(B)(i)(ii), (C)(i)(I), (D)(ii), (E)(i).
In other words, even if the institutionalized spouse is eligible for Medicaid
coverage after spending down her assets, 1396p(c) requires a state to impose a transfer
penalty (a period of restricted coverage) if either spouse disposed of assets for less than
fair market value during the look-back period. However, the transfer penalties under
paragraph (1) do not apply in certain circumstances. As relevant here: An individual
shall not be ineligible for medical assistance by reason of paragraph (1) to the extent
that . . . (B) the assets [] (i) were transferred to the individuals spouse or to another for
the sole benefit of the individuals spouse[.] Id. 1396p(c)(2)(B)(i). Congress
amended 1396p(c)(2)(B) to its current form in 1993.

See Omnibus Budget

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Reconciliation Act (OBRA) of 1993, Pub. L. No. 10366, 13611(a)(2), 107 Stat. 312;
MCCA of 1988, Pub. L. No. 100360, 303(b), 102 Stat. 683.
Congress later passed the Deficit Reduction Act of 2005 (DRA), Pub. L. No.
109171, 120 Stat. 4, 6264, as amended by the Tax Relief and Health Care Act of 2006,
Pub. L. No. 109432, 120 Stat. 2922, 2998, which added provisions to paragraph
(1) concerning whether the purchase of certain annuities should be deemed transfers for
less than fair market value. See 42 U.S.C. 1396p(c)(1)(F), (G). Congress did not,
however, amend 1396p(c)(2)(B) with the DRAs enactment.
II.
A.
Mrs. Hughes entered a nursing home in 2005. For nearly four years, Mr. Hughes
paid for his wifes nursing home costs using the couples resources, which largely
consisted of funds from his IRA account. In June 2009, about three months before Mrs.
Hughes applied for Medicaid coverage, Mr. Hughes purchased a $175,000 immediate
single-premium annuity for himself using funds from his IRA account. The annuity
guarantees monthly payments of $1,728.42 to Mr. Hughes from June 2009 to January
2019, totaling nine years and seven months, which is commensurate with Mr. Hughess
undisputed actuarial life expectancy. Combined with other retirement income, the
annuity increased Mr. Hughess monthly income to $3460.64 after the annuity took
effect. In the event of Mr. Hughess death, Mrs. Hughes is the first contingent
beneficiary and the Ohio agency is the remainder beneficiary for the total amount of
medical assistance furnished to annuitant[s] spouse, [Mrs.] Hughes.
Mrs. Hughes applied for Medicaid coverage in September 2009. In December
2009, the Stark County division of the Ohio agency issued a notice that she was eligible
for Medicaid as of the month of her application. However, the Ohio agency placed her
on restricted coverage from September 2009 to June 2010, deeming her ineligible for
coverage of nursing home costs for that time period because of Mr. Hughess annuity
purchase.

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The Ohio agency determined that Mr. Hughess annuity purchase was an
improper transfer because he used a community resource (the IRA account) in an amount
that exceeded his CSRA of $109,560 and because the annuity failed to name Ohio as the
first contingent beneficiary. Thus, the Ohio agency placed Mrs. Hughes on restricted
coverage for approximately ten months, the number of months that the difference
between Mr. Hughess CSRA and the annuity would have paid for nursing home costs.
The Hugheses appealed the decision. The Ohio agency affirmed in a state-hearing and
administrative-appeal level decision. State-court proceedings have been stayed pending
this cases resolution.
B.
In August 2010, the Hugheses filed this case under 42 U.S.C. 1983, alleging
that the Ohio agency violated the federal Medicaid statutes, including
1396p(c)(2)(B)(i), when it placed Mrs. Hughes on restricted coverage due to Mr.
Hughess purchase of an annuity with funds from his IRA account.5 They claimed, inter
alia, that the Medicaid statutes grant them the right to purchase an actuarially-sound6
immediate single-premium annuity for the sole benefit of the community spouse.
The district court granted summary judgment in favor of the Ohio agency and
denied the Hugheses request for injunctive relief. See Hughes v. Colbert, 872 F. Supp.
2d 612 (N.D. Ohio 2012).7

Notwithstanding the Hugheses argument that

1396p(c)(2)(B)(i) allows an institutionalized spouse to transfer unlimited assets to her

community spouse without the transaction being considered an improper transfer, the
5

The Hugheses were originally joined by another couple as plaintiffs, who are no longer parties
to this action.
6

An annuity is actuarially sound where the entire expected return from the annuity is
commensurate with a reasonable estimate of the annuitants expected lifetime, as determined by the
actuarial tables published by the Office of the Actuary of the Social Security Administration. See State
Medicaid Manual 3258.9(B).
7

The district court rejected the Ohio agencys argument that the court should abstain from
exercising jurisdiction over this case pursuant to the Younger abstention doctrine, and ruled that the
Medicaid statutes cited by the Hugheses conferred enforceable rights under 1983. The Ohio agency does
not contest these rulings, and neither issue affects our jurisdiction. Further, the Hugheses do not challenge
the district courts dismissal of their equal protection claim or their claim that certain Ohio Medicaid
regulations are preempted by Federal law. We deem these issues abandoned.

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court ruled that 1396r-5(f)(1) precludes the transfer of assets to the community spouse
that exceeds the CSRA and applies to the pre-eligibility transfer at issue here; and that
1396r-5s supersession clause requires resolution of any inconsistency between
[ 1396r-5(f)(1)] and 1396p(c)(2)(B) in the former clauses favor. Id. at 62223. The
Hugheses timely appealed.
III.
A.
We review de novo the district courts grant of summary judgment, as well as its
interpretation of federal statutes. Cnty. of Oakland v. Fed. Hous. Fin. Agency, 716 F.3d
935, 939 (6th Cir. 2013). In reviewing questions of statutory interpretation, we employ
a three-step framework:
[F]irst, a natural reading of the full text; second, the common-law
meaning of the statutory terms; and finally, consideration of the statutory
and legislative history for guidance. The natural reading of the full text
requires that we examine the statute for its plain meaning, including the
language and design of the statute as a whole. If the statutory language
is not clear, we may examine the relevant legislative history.
Elgharib v. Napolitano, 600 F.3d 597, 601 (6th Cir. 2010) (citations and internal
quotation marks omitted).
To the extent that HHS has issued guidance on the federal Medicaid statutes in
the form of opinion letters, an agency manual, and an amicus brief that lack the force
law, its statutory interpretations are not afforded deference under Chevron U.S.A. Inc.
v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), but are entitled to
respect under . . . Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944), . . . only to the
extent that those interpretations have the power to persuade[.] Christensen v. Harris
Cnty., 529 U.S. 576, 587 (2000) (internal citation altered); see In re Carter, 553 F.3d
979, 98788 (6th Cir. 2009) (applying Skidmore to the amicus brief filed by a federal
agency charged with administering a statutory scheme); Caremark, Inc. v. Goetz,

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480 F.3d 779, 787 (6th Cir. 2007) (applying Skidmore to interpretations of Medicaid
statutes set forth by CMS).
B.
The primary issue on appeal is whether the transfer of a community resource to
purchase an annuity for the community spouses sole benefit, which transfer is done after
the institutionalized spouse is institutionalized but before the institutionalized spouses
Medicaid eligibility is determined, can be deemed an improper transfer under 42 U.S.C.
1396r-5(f)(1), even though 1396p(c)(2)(B)(i) allows a transfer of assets to another
for the sole benefit of the individuals spouse.8 The district court accepted the Ohio
agencys argument that a transfer of assets that exceeds the CSRA, even if made before
the Ohio agency determined that Mrs. Hughes was eligible for Medicaid coverage, was
improper under 42 U.S.C. 1396r-5(f)(1) and that this provision supersedes
1396p(c)(2)(B)(i) per the MCCA supersession clause, 1396r-5(a)(1).
We reject the district courts approach. Section 1396r-5(f)(1) reads:
An institutionalized spouse may, without regard to section 1396p(c)(1)
. . . , transfer an amount equal to the community spouse resource
allowance . . . , but only to the extent the resources of the
institutionalized spouse are transferred to (or for the sole benefit of) the
community spouse. The transfer under the preceding sentence shall be
made as soon as practicable after the date of the initial determination of
eligibility . . . .
42 U.S.C. 1396r-5(f)(1).
The provision begins in permissive, not prohibitive, terms. The Ohio agency
acknowledges that the first sentence tells us that a transfer to the community spouse up
to the CSRA is allowed. That same sentence states that such transfer is permitted
8

The Ohio agency concedes that Mr. Hughess annuity was not a countable resource in
determining his wifes Medicaid eligibility. Indeed, the Ohio agency determined that Mrs. Hughes was
eligible for Medicaid, but placed her on restricted coverage because it deemed improper the transfer of
funds from Mr. Hughess IRA account to purchase the annuity. Thus, we need not decide the question
whether the annuity may be considered a countable resource in the initial eligibility determination. See
Lopes v. Dept of Soc. Servs., 696 F.3d 180, 188 (2d Cir. 2012) (holding that the payment stream from a
non-assignable annuity is not a resource for purposes of determining Medicaid eligibility); Morris v. Okla.
Dept of Human Servs., 685 F.3d 925, 93233 & n.5 (10th Cir. 2012) (collecting case-law).

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notwithstanding 1396p(c)(1), which governs transfer penalties. The next sentence

provides that this permitted transfer shall be made as soon as practicable after the date
of the initial determination of eligibility. (emphasis added). It does not say anything
about a transfer made before the initial determination of eligibility, let alone that any
pre-eligibility transfer that exceeds the CSRA is subject to a transfer penalty.
Tellingly, 1396r-5(f)(1) is a CSRA provision. It does not appear within
1396p(c)(1)s framework, which imposes restricted coverage for the disposal of assets
for less than fair market value during the look-back period. Even assuming that 1396r5(f)(1) provides authority for a state to impose a period of ineligibility for a transfer that
exceeds the CSRA,9 the statutory language and its relationship with 1396p(c) do not
support the Ohio agencys argument that 1396r-5(f)(1) controls a transfer made before
Medicaid eligibility is established.

Thus, 1396r-5(f)(1) does not supersede

1396p(c)(2)(B)(i) for pre-eligibility transfers because there is no inconsistency

between the provisions.
On this point, we join the Tenths Circuits holding: To avoid rendering
1396p(c)(2)(B)(i) superfluous, we agree that it and 1396r-5(f)(1) must be read to
operate at distinct temporal periods: one period during which unlimited spousal transfers
are permitted, and one period during which transfers may not exceed the CSRA.
Morris v. Okla. Dept of Human Servs., 685 F.3d 925, 935 (10th Cir. 2012). When
assets are transferred to the individuals spouse or to another for the sole benefit of the
individuals spouse, 42 U.S.C. 1396p(c)(2)(B)(i), before the institutionalized spouse
is determined eligible for Medicaid coverage, the unlimited transfer provision of
1396p(c)(2) controls, and [a] transfer penalty [is] improper [under 1396r-5(f)(1)].10
Morris, 685 F.3d at 938.

A State . . . may not provide for any period of ineligibility for an individual due to transfer of
resources for less than fair market value except in accordance with this subsection [(i.e., 1396p(c))].
42 U.S.C. 1396p(c)(4). The provisions therein do not expressly include penalties for a transfer that
exceeds the CSRA.
10

The Supreme Court also has referenced 1396r-5(f)(1) with a post-eligibility understanding.
See Blumer, 534 U.S. at 482 n.5.

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In response to Morriss holding, the Ohio agency asks us to follow an

unpublished district court opinion, Burkholder v. Lumpkin, No. 3:09-cv-1878, 2010 WL
522843 (N.D. Ohio Feb. 9, 2010). But Burkholder does not support its position because,
in that case, the district court held that 1396r-5(f) supersedes 1396p(c)(2) where . . .
the transfer of assets from the institutionalized spouse to the community spouse occurs
after the initial eligibility determination. Id. at *7. By contrast, the Ohio agency seeks
to impose a penalty for a transfer that occurred before it found Mrs. Hughes eligible for
coverage.
Further, the two primary state-court cases the Ohio agency cites in
supportFeldman v. Department of Children & Families, 919 So.2d 512 (Fla. Dist. Ct.
App. 2005), and McNamara v. Ohio Department of Human Services, 744 N.E.2d 1216
(Ohio Ct. App. 2000)are unpersuasive.11 Neither state-court decision engages in any
meaningful analysis of the statutory text. Indeed, one commentator has noted that such
rulings are inconsistent with statutory authority and based on antipathy toward
alleged sheltering of assets.

Eric M. Carlson, Long-Term Care Advocacy

7.12(5)(e)(ii)(A) (Matthew Bender 2012). Policy [rationales] cannot prevail over the
text of a statute. Tran v. Gonzales, 447 F.3d 937, 941 (6th Cir. 2006).
Our reading of the statute is supported by HHSs guidance. In its amicus brief,
HHS explains that 1396r-5(f)(1) has nothing to say about the inter-spousal transfers
that are permissible before a determination of eligibility. The federal agencys State
Medicaid Manual confirms that 1396r-5(f)(1) applies to post-eligibility reallocation
of resources and that 1396p(c)(2)(B)(i) permits transfers to a third party for the sole
benefit of the individuals spouse. See State Medicaid Manual 3258.11, 3262.4.
HHS has taken the same position in a series of opinion letters issued to state plan
administrators and to the public, reasoning that 1396r-5(f)(1) does not conflict with,
and thus does not supersede, 1396p(c)(2)(B), as the two provisions apply to different
situations, before and after eligibility is established; and that permitting inter-spousal

11

Unlike this case, the at-issue financial product in McNamara was an annuitized trust rather
than a standard commercial annuity. See 744 N.E.2d at 1221.

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transfers under 1396p(c)(2)(B) does not render 1396r-5(f)(1) a nullity, as the latter
provision still has meaning with respect to resource allocation after eligibility is
established. We agree with amici curiae, the National Academy of Elder Law Attorneys
and the Ohio State Bar Association (who appear in support of the Hugheses), that HHSs
view on this issue represents a well thought out explanation of the differences between
these two statutes and thus is due respect under Skidmore.
The Ohio agency argues that Congress intended a different result, one that would
subordinate 1396p(c)(2)(B)(i) to 1396r-5(f)(1)s CSRA transfer cap. But the
statutory text does not provide any indication of such an intent for the reasons described.
Moreover, the legislative history does not support the Ohio agencys contention. A
Senate amendment to H.R. 2264 (the bill that ultimately became OBRA, which enacted
1396p(c)(2)(B)(i)) would have subjected the unlimited-transfer provision to 1396r5(f)(1)s CSRA transfer cap. See 139 Cong. Rec. 7913-01, 7986 (1993) (bill passes the
Senate with amendment); id. at 8013 (amending 1396p(c)(2)(B)(i) to provide that
(B) the resources-(i) were transferred to the individuals spouse or to another for the
sole benefit of the individuals spouse and did not exceed the amount permitted under
section 1924(f)(1) (emphasis added)).

In a conference report, the House of

Representatives receded from its disagreement with the Senate amendment, but
nevertheless offered substitute language that dropped the reference to 1396r-5(f)(1),
and provided the current language of 1396p(c)(2)(B)(i), which was adopted. H.R. Rep.
103-213, at 1, 324 (1993) (Conf. Rep.), reprinted in 1993 U.S.C.C.A.N. 1088. That
Congress declined to adopt language supporting the very construction of
1396p(c)(2)(B)(i) that the Ohio agency now advances is a compelling indication
of its intent not to subordinate 1396p(c)(2)(B)(i) to 1396r-5(f)(1).

INS v.

Cardoza-Fonseca, 480 U.S. 421, 44243 (1987) (Few principles of statutory

construction are more compelling than the proposition that Congress does not intend sub
silentio to enact statutory language that it has earlier discarded in favor of other
language. (internal quotation marks omitted)).

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C.
The Ohio agency raises two alternate grounds for affirmance. To the extent it did
not raise the issues before the district court, we address them to promote finality in this
litigation, as the issues require no further factual development and have been sufficiently
presented for our review. See In re Morris, 260 F.3d 654, 664 (6th Cir. 2001).
1.

Section 1396p(c)(2)(B)(i)s sole-benefit rule

The Ohio agency argues that the transfer of a community resource to purchase

an annuity by or on behalf of the community spouse cannot be for the sole benefit of
the individuals spouse under 1396p(c)(2)(B)(i) ifas herethe annuity designates
the institutionalized spouse as the first contingent beneficiary and the Ohio agency as the
second contingent beneficiary to receive payments in the event of the community
spouses early death, even if the annuity is actuarially sound and payments are made
only to the spouse during his life. We disagree.
The statute does not define the term sole benefit. Nor is the term defined by
federal regulation. The Ohio agencys position on this issue rests primarily on the plain
meaning of the word sole, citing dictionaries and other authorities for the proposition
that the word means only, solitary, single or exclusive. But what a dictionary
does not tell us is whether a transfer of assets to another for the sole benefit of the
individuals spouse means (as HHS contends in its amicus brief and the Hugheses
contend in their second supplemental brief) that the transfer may benefit only the spouse
during his life but may include contingent beneficiaries, so long as the financial
instrument is actuarially sound and payments are made only to the spouse during his life;
or (as the Ohio agency contends) that the transfer may benefit only the spouse at the time
of the transfer and also thereafter, such that any remaining assets in the event of the
spouses early death cannot pass to a contingent beneficiary. Cf. Sanford J. Schlesinger
and Barbara J. Scheiner, Medicaid After OBRA 93, 21 Est. Plan. 74, 76 (1994) (opining
that it is an open question whether, under the sole-benefit rule, a trust for the sole

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benefit of the spouse for life, with the remainder to someone else, [would] be a trust for
the sole benefit of the spouse).
The Ohio agency argues that HHSs position on this issue is inconsistent. The
State Medicaid Manual, 3258.11, explains:
The exception for transfers to a third party for the sole benefit of the
spouse may have greater impact on eligibility because resources may
potentially be placed beyond the reach of either spouse and thus not be
counted for eligibility purposes. However, for the exception to be
applicable, the definition of what is for the sole benefit of the spouse (see
3257) must be fully met. This definition is fairly restrictive, in that it
requires that any funds transferred be spent for the benefit of the spouse
within a time-frame actuarially commensurate with the spouses life
expectancy. If this requirement is not met, the exemption is void, and a
transfer to a third party may then be subject to a transfer penalty.
In turn, 3257 of the manual states:
A transfer is considered to be for the sole benefit of a spouse, blind or
disabled child, or a disabled individual if the transfer is arranged in such
a way that no individual or entity except the spouse, blind or disabled
child, or disabled individual can benefit from the assets transferred in any
way, whether at the time of the transfer or at any time in the future.
Id. 3257.
Although the phrase at any time in the future might be interpreted to mean that
contingent beneficiaries cannot be named in the financial instrument, this is not the
federal agencys position. As HHS has reasoned in its amicus brief and in a prior
opinion letter, the designation of contingent beneficiaries to receive funds remaining in
an annuity in the event of the spouses early death would not necessarily violate the solebenefit rule, so long as the annuity is actuarially sound and provides for payments only
to the spouse during his life. Accord Mertz v. Houstoun, 155 F. Supp. 2d 415, 426 n.14
(E.D. Pa. 2001) (If an annuitant receives the amount invested [plus interest] during his
lifetime, the annuity is actuarially sound and for his sole benefit.).

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HHSs position is mirrored by Ohios implementing regulation:

A transfer for the sole benefit of the spouse, blind or disabled child or
disabled individual in which there is a provision within the trust, contract
or other binding instrument to expend all of the transferred resources [for
the benefit of the individual during that individuals life expectancy] may
provide for other beneficiaries.
Ohio Admin. Code 5101:1-39-07(F)(1).12
The Ohio agency asserts that HHSs position and its states regulation are wrong.
But if we were to adopt the Ohio agencys definition of sole benefit, it is difficult to
conceive what type of financial arrangement could meet it. Under the definition urged
by the Ohio agency, it acknowledges that, universally, . . . it seems that no annuity (or
at least no typical annuity) could meet this [definition] because it seems to be typical that
an annuity instrument names at least one [contingent] beneficiary. We take its
reasoning two steps further. Even if an annuity or another financial arrangement does
not designate a contingent beneficiary, or even if the arrangement (such as a pure life
annuity) expressly provides that payments shall terminate upon the spouses death,
someone other than the spouse will benefit. In the first scenario, the presence of
contingent beneficiaries is a certainty under the law whether the beneficiaries are
designated in the financial instrument, in the spouses will, or by the Ohio statute of
descent and distribution, Ohio Rev. Code. 2105.06. In the second scenario, the entity
that issued the financial product will benefit upon forfeiture of future payment.
Were we to adopt the Ohio agencys definition, no transfer to another for the
sole benefit of the individuals spouse under most standard financial arrangements
could satisfy 1396p(c)(2)(B)(i). We reject this acontextual approach to statutory
interpretation. Flores v. Rios, 36 F.3d 507, 513 (6th Cir. 1994); see Davis v. Mich.
Dept of Treasury, 489 U.S. 803, 809 (1989) (It is a fundamental canon of statutory

12

As another source of guidance, the Social Security Administrationin setting forth its policy
that a special needs trust must be for the sole benefit of the designated individualhas defined the term
to mean that the trust must benefit no one but that individual, whether at the time the trust is established
or at any time for the remainder of the individuals life. Social Security Program Operations Manual
System (POMS), SI 011120.201(F)(2).

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construction that the words of a statute must be read in their context and with a view to
their place in the overall statutory scheme.).
We cannot presume that Congress operated in a vacuum when it enacted
1396p(c)(2)(B)(i). By providing that a couple may transfer assets to another for the
sole benefit of the individuals spouse, the term another is not limiting. It naturally
encompasses standard financial arrangements (such as an annuity) crafted for the
spouses sole benefit during his life. Our reading is supported by HHS, which takes the
position that the term another includes an entity that issues the annuity. In this
context, HHSs construction of the sole-benefit rule gives the statute meaning. The
actuarial-soundness requirement reasonably assures that the assets were transferred to
a third party for the individual spouses sole benefit. Any contingent interest becomes
relevant only if the spouse dies early. To extend the sole-benefit requirement past a
spouses death is nonsensical.

The federal agencys construction is reasonable,

supported by the statutory structure, and, thus, due respect under Skidmore.
2.

Whether an annuity that satisfies 1396p(c)(2)(B)(i)s sole-benefit rule must

also satisfy the annuity rules under 1396p(c)(1)(F)
The Ohio agency argues the transfer of a community resource to purchase an

annuity by or on behalf of the community spouse that satisfies 1396p(c)(2)(B)(i)s

sole-benefit rule must also satisfy the annuity rules under 1396p(c)(1)(F), and that
because Mr. Hughess annuity does not name Ohio as the remainder beneficiary in the
first position, it fails to satisfy 1396p(c)(1)(F).13 However, its reading of the two
provisions defies the text and structure of the statute.
As the Hugheses correctly contend in their second supplemental brief, an annuity
that satisfies 1396p(c)(2)(B)(i) need not satisfy 1396p(c)(1)(F). The annuity rules

13

The Ohio agency does not dispute that Mr. Hughess annuity would satisfy 1396p(c)(1)(F)
if it named Ohio as the first contingent beneficiary for at least the total amount of medical assistance paid
on behalf of the institutionalized spouse and Mrs. Hughes as the second contingent beneficiary. To the
extent the transfer here (based on Mr. Hughess purchase of an annuity) is not for fair market value under
1396p(c)(1)(F), it is because of the contingent remainder interest held by the institutionalized spouse,
the value of which was not transferred because it is retained by her.

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under 1396p(c)(1)(F) fall within 1396p(c)(1)s (paragraph (1)) overall transferpenalty regime:
For purposes of this paragraph, the purchase of an annuity shall be
treated as the disposal of an asset for less than fair market value unless
(i) the State is named as the remainder beneficiary in the
first position for at least the total amount of medical
assistance paid on behalf of the institutionalized
individual under this subchapter; or
(ii) the State is named as such a beneficiary in the second
position after the community spouse or minor or disabled
child and is named in the first position if such spouse or
a representative of such child disposes of any such
remainder for less than fair market value.
42 U.S.C. 1396p(c)(1)(F) (emphasis added). On the other hand, 1396p(c)(2)(B)(i)
is an exception to transfer penalties under paragraph (1):
An individual shall not be ineligible for medical assistance by reason of
paragraph (1) to the extent that-- (B) the assets-- (i) were transferred to
the individuals spouse or to another for the sole benefit of the
individuals spouse[.]
Id. 1396p(c)(2)(B)(i) (emphasis added).
In its amicus brief, HHS takes the position that an annuity that satisfies
1396p(c)(2)(B)(i)s sole-benefit rule must also satisfy 1396p(c)(1)(F). It does so
without any reference to the statutory text, meaningful analysis, or reference to authority.
The only proffered support for HHSs position is a 2006 CMS letter enclosure
concerning the treatment of annuities under the DRA. In that letter, the federal agency
reasoned:

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Unlike the new section 1917(c)(1)(G)[14] added by section 6012(c) of the

DRA . . . , section 1917(c)(1)(F) does not restrict application of its
requirements only to an annuity purchased by or on behalf of an
annuitant who has applied for medical assistance for nursing facility or
other long termcare services.
Therefore, we interpret section
1917(c)(1)(F) as applying to annuities purchased by an applicant or by
a spouse, or to transactions made by the applicant or spouse.
CMS, Changes in Medicaid Annuity Rules under the DRA of 2005 II.B (July 27,
2006).
As the Ohio agency acknowledges, HHS applies 1396p(c)(1)(F) to an annuity
that otherwise satisfies 1396p(c)(2)(B)(i) without acknowledging or addressing the
structure of 1396p(c), which places 1396p(c)(1)(F) within paragraph (1)s transferpenalty framework and specifically sets forth 1396p(c)(2)(B)(i)s sole-benefit rule as
an exception to paragraph (1). HHSs rationale lacks reasoning and contravenes the
plain language of 1396p(c)(2)(B)(i) and 1396p(c)(1)(F). Thus, we decline to afford
its interpretation respect under Skidmore. See Flores v. USCIS, 718 F.3d 548, 55455
(6th Cir. 2013).

14

The provision provides:

(G) For purposes of this paragraph with respect to a transfer of assets, the term assets
includes an annuity purchased by or on behalf of an annuitant who has applied for
medical assistance with respect to nursing facility services or other long-term care
services under this subchapter unless-(i) the annuity is-- (I) an annuity described in subsection (b) or (q) of section
408 of the Internal Revenue Code of 1986 [Title 26, U.S.C.A.]; or
(II) purchased with proceeds from-- (aa) an account or trust described in
subsection (a), (c), or (p) of section 408 of such Code; (bb) a simplified
employee pension (within the meaning of section 408(k) of such Code); or
(cc) a Roth IRA described in section 408A of such Code; or
(ii) the annuity-- (I) is irrevocable and nonassignable; (II) is actuarially sound
(as determined in accordance with actuarial publications of the Office of the
Chief Actuary of the Social Security Administration); and (III) provides for
payments in equal amounts during the term of the annuity, with no deferral and
no balloon payments made.
42 U.S.C. 1396p(c)(1)(G) (internal paragraph formatting altered). We need not address the Hugheses
argument that the annuity is saved by 1396p(c)(1)(G) given our disposition of this appeal on other
grounds.

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Rather than adopt HHSs rationale, the Ohio agency asks us to hold that
Congress could not have enacted 1396p(c)(1)(F) without intending it to supplement
the earlier and more general provision of 1396p(c)(2)(B)(i).
We disagree with the Ohio agencys characterization of the two provisions.
Although it is axiomatic that a general provision yields to a specific provision when
there is a conflict, Regl Airport Auth. of Louisville v. LFG, LLC, 460 F.3d 697, 716
(6th Cir. 2006), there is no inherent conflict between the two provisions, and each
provision is specific in its own way. Section 1396p(c)(1)(F) purports to govern all
annuities through the imposition of a transfer penalty under paragraph (1) if the annuity
does not satisfy certain rules. On the other hand, 1396p(c)(2)(B)(i) carves out an
exception to paragraph (1)s transfer penalties. The language of 1396p(c)(1)(F) limits
its annuity rules [f]or purposes of this paragraph. The language of 1396p(c)(2)(B)(i)
provides that [a]n individual shall not be ineligible for medical assistance by reason of
paragraph (1) if a transfer satisfies, in relevant part, the sole-benefit rule. The two
provisions complement rather than contradict one another.15 Section 1396p(c)(1)(F) is
not rendered illusory. It applies to all annuities not excepted by another provision such
as 1396p(c)(2)(B), including annuities benefiting non-exempt children or a spousal
annuity that is not actuarially sound.
Because the provisions are not in conflict, that Congress enacted
1396p(c)(1)(F) after 1396p(c)(2)(B)(i) does not support a finding that
1396p(c)(2)(B)(i) must give way to the newer provision, 1396p(c)(1)(F). See United
States v. Clay, 982 F.2d 959, 963 (6th Cir. 1993) (When interpreting the effect of a new
law upon an old one, [o]nly a clear repugnancy between the old law and the new results

15

With respect to annuity disclosures, 42 U.S.C. 1396p(e)(1) provides that the Medicaid
application must include a statement that under paragraph (2) the State becomes a remainder beneficiary
under such an annuity or similar financial instrument by virtue of the provision of such medical
assistance. The referenced paragraph 2 of subsection (e) limits itself to annuities that are subject to
1396p(c)(1)(F)s annuity rules (such as naming the state as the remainder beneficiary). See id.
1396p(e)(2)(A) (In the case of disclosure concerning an annuity under subsection (c)(1)(F) of this
section, the State shall notify the issuer of the annuity of the right of the State under such subsection as a
preferred remainder beneficiary in the annuity for medical assistance furnished to the individual.). Thus,
subsection (e) reenforces the conclusion that 1396p(c)(1)(F) does not control all annuities.

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in the former giving way and then only pro tanto to the extent of the repugnancy.
(alteration in original) (quoting Georgia v. Penn. R. Co., 324 U.S. 439, 457 (1945))).
Last, the Ohio agencys reference to floor statements by members of
Congressindicating in general terms that the DRA was enacted to close loopholes
related to the purchase of annuitiesis unavailing given that the statutory language
unambiguously limits 1396p(c)(1)(F) to paragraph (1) and 1396p(c)(2)(B)(i) is an
exception to paragraph (1)s transfer penalties and was unamended by the DRA.16 See
Barnhart v. Sigmon Coal Co., 534 U.S. 438, 457 n.15 (2002) (noting that floor
statements cannot override clear statutory text); Conn. Natl Bank v. Germain, 503 U.S.
249, 25354 (1992) (We have stated time and again that courts must presume that a
legislature says in a statute what it means and means in a statute what it says there.
When the words of a statute are unambiguous, then, this first canon is also the last:
judicial inquiry is complete. (internal citations and quotation marks omitted)). If
Congress prefers the interpretation that applies 1396p(c)(1)(F) notwithstanding
1396p(c)(2)(B)(i), it need only amend the statute.
IV.
For the foregoing reasons, we REVERSE the district courts judgment and
remand for further proceedings consistent with this opinion.

16

In any event, such referenced statements do not reveal Congressional intent to subject
1396p(c)(2)(B)(i) to 1396p(c)(1)(F)s annuity rules.